Abstract

http://ssrn.com/abstract=6834
 
 

Citations



 


 



Forecasting the Frequency of Changes in Quoted Foreign Exchange Prices with the Autoregressive Conditional Duration Model


Jeffrey R. Russell


University of Chicago - Booth School of Business - Econometrics and Statistics

Robert F. Engle


New York University - Leonard N. Stern School of Business - Department of Economics; New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)



Abstract:     
This paper applies the Autoregressive Conditional Duration model to Foreign Exchange quotes arriving on Reuter's screens. The Autoregressive Conditional Duration model, proposed in Engle and Russell (1995), is a new statistical model for the analysis of data that do not arrive in equal time intervals. When Dollar/Deutschmark data are examined, it is clear that many of the price quotes carry little information about the price process, as they are simply repeats of the previous quote. By selectively thinning the sample, we develop a measure and forecasts for the intensity of price changes. This measure is related to standard measures of volatility but is formulated in a way that better captures the irregular sampling intervals that are inherent to high frequency financial data. Continuous-stochastic-process theorems for crossing times are used to derive an exact relationship between the intensity of price changes and standard volatility measures. The model might be useful for traders and allows tests that other variables are useful in forecasting the intensity of price changes. Generally, little support is found for price leadership, but other variables influence the intensity of price changes.

JEL Classification: G15

working papers series


Not Available For Download

Date posted: August 22, 1998  

Suggested Citation

Russell, Jeffrey R. and Engle, Robert F., Forecasting the Frequency of Changes in Quoted Foreign Exchange Prices with the Autoregressive Conditional Duration Model. Available at SSRN: http://ssrn.com/abstract=6834

Contact Information

Jeffrey R. Russell (Contact Author)
University of Chicago - Booth School of Business - Econometrics and Statistics ( email )
Chicago, IL 60637
United States
773-834-0720 (Phone)
773-702-0458 (Fax)
Robert F. Engle
New York University - Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
New York University (NYU) - Department of Finance
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,339

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.344 seconds